(a) Records and Papers.
(1) In assignments for the benefit of creditors, the clerk shall keep a register and docket. The clerk shall enter in the register in full every final order according to date; the docket shall contain a brief note of each day’s proceedings under the respective title.
(2) Every petition, order, decree or other paper shall have endorsed on the outside the nature of such paper, the date of filing, and the name, number and page of the book in which the proceedings are entered by the clerk.
(3) The papers in each proceeding shall be kept in a separate file, as required by section 18 of the Debtor and Creditor Law. No paper shall be removed from the files of the court except by order of the court.
(4) Except as otherwise provided by law, every notice or citation, subpoena, and all process shall issue out of the court under seal and be attested by the clerk.
(b) Appearances.
(1) Any person interested in an assignment for the benefit of creditors may appear either in person or by attorney. If in person, his or her address and telephone number, and if by attorney, the name, address and telephone number, shall be endorsed on every appearance filed by such attorney. The name of such person or attorney shall be entered in the docket.
(2) The assignee’s attorney shall file a written notice of appearance as soon as possible, but not later than 10 days after being retained.
(3) When an assignee is removed, voluntarily or involuntarily, and another person has been appointed as assignee, a certified copy of the order shall be filed with the clerk of the county where the original assignment was recorded. The clerk shall make an entry on the record of the original assignment to show the appointment of the substituted assignee, and the copy of the order of substitution shall be attached to the original assignment.
(c) Duties of the Assignor and Assignee.
(1) The assignor shall deliver all books, records and documents to the assignee immediately upon filing the assignment, but the assignee shall make them available to the assignor to prepare the schedules.
(2) The assignee’s attorney shall require the person in charge of the assignor’s business to submit to examination under oath and shall complete such examinations within 30 days, unless extended by the court for good cause.
(3) The assignee shall promptly require the assignor, if an individual, or its officers and persons in charge of its finances, if a corporation, to pay to the assignee all trust funds withheld for accounting to any governmental authorities, together with any preferential payments paid to them or to others by the assignor.
(4)
(i) Upon the filing of an assignment, the court, upon application, may stay any prospective sale or transfer to enforce a lien against property in the custody of the court, whether by a secured creditor, a judgment creditor, a lienor or otherwise.
(ii) With respect to property not in the custody of the court, possession having been acquired by the secured creditor, judgment creditor or lienor, the assignee may, upon notice to the adverse party, apply to the court where such assignment proceedings are pending to enjoin any prospective sale and to permit the assignee to conduct the sale, whether private or a public auction, upon such terms and conditions as in its discretion will not prejudice the interest of the secured party and yet preserve the interest of the assigned estate by affording the assignee an opportunity to liquidate the assets under the most favorable terms and conditions.
(5) Every assignee shall keep full, exact and regular books of account of all receipts, payments and expenditures of monies.
(6) In making sales at auction of personal property, the assignee shall give at least 10 days’ notice of the time and place of sale and of the Articles to be sold, by advertisement in one or more newspapers. Such sale shall be held within 15 days after the entry of the order authorizing the same, unless in the meantime an order of the court has been obtained granting an extension of the time for such sale; and he or she shall give notice of the sale at auction of any real estate at least 20 days before such sale. Upon such sale, the assignee shall sell by printed catalogue, in parcels, and shall file a copy of such catalogue, with the prices obtained for the goods sold, within 20 days after the date of such sale.
(7)
(i) Notwithstanding subdivision (f) of this section, upon receipt of an offer for all or a substantial part of the assets, an assignee may for good cause shown make application to the court for leave to sell at a private sale in lieu of a public auction sale. A hearing thereon shall be scheduled for the purpose of considering that offer or any higher or better offers that may be submitted upon such notice and advertising as the court may deem appropriate.
(ii) Upon application by an assignee or a creditor, setting forth that a part or the whole of the estate is perishable, the nature and location of such perishable property, and that there will be a loss if the same is not sold immediately, the judge presiding, if satisfied of the facts stated and that the sale is required in the interest of the estate, may order the same to be sold with or without notice to creditors.
(8) Upon an application made for a notice of filing of his or her account and for a hearing thereon, the assignee shall file with his or her petition his or her account with the vouchers.
(d) Accounting and Schedules.
(1) The assignee must file an account in all cases.
(2) Failure to file an interim accounting in a pending proceeding within six months after the filing of an assignment may cause a forfeiture of commissions and fees of the assignee and his or her attorney and shall constitute grounds for their removal.
(3) Where more than one sheet of paper is necessary to contain the schedule of liabilities and inventory of assets required to be filed by the assignor or assignee, each page shall be signed by the person or persons verifying the same. Contingent liabilities shall appear on a separate sheet of paper. The sheets on which such schedule and inventory are written shall be securely fastened before the filing thereof and shall be endorsed with the full name of the assignor and assignee; and when filed by an attorney, the name and address of such attorney shall also be endorsed thereon. Such schedule and inventory shall fully and fairly state the nominal and actual value of the assets and the cause of differences between such values. A separate affidavit will be required explaining such stated cause of difference. If it is deemed necessary, affidavits of disinterested experts as to the claimed values must be furnished; and if such schedule and inventory are filed by the assignee, they must be accompanied by affidavits made by such assignee and by some disinterested expert showing, in detail, the nature and value of the property assigned. The name, residence, occupation and place of business of the assignor, and the name and place of residence of the assignee must be annexed to the schedule and inventory or incorporated in the affidavit verifying the same. There shall be a recapitulation at the end of such schedule and inventory, as follows:
Debts and liabilities amount to ………. $
Fair value of assets …………………… $
Assets realized on liquidation ………… $
(4) Application to amend the schedule shall be made by verified petition in which the amendment sought to be made shall appear in full, and such amendment shall be verified in the same manner as the original schedule.
(5) The account of the assignee shall be in the nature of a debit and credit statement; he or she shall debit himself or herself with the assets as shown in the schedule, as filed, and credit himself or herself with any decrease and expenses.
(6) The statement of expenditures shall be full and complete and the vouchers for all payments shall be attached to the account.
(7) The affirmative on the accounting shall be with the assignee; the objections to the account may be presented to the court or designated referee in writing or be brought out on a cross-examination. In the latter case, they must be specifically taken and entered in the minutes.
(8) The testimony taken and all exhibits marked in evidence shall be filed with the report of the referee.
(9) It shall be the duty of the assignee to close up the estate as expeditiously as possible; and, unless good cause for greater delay can be shown and authorized by an order of the court obtained prior to the expiration of the permissible time, the assignee’s account shall be filed within 15 months from the date of the execution of the assignment deed.
(10) The court may order notice to creditors by publication to present their claims as provided in section 5 of the Debtor and Creditor Law.
(e) Court-Appointed Referee.
(1) The court may appoint a referee to take and state any contested account or to hear and report on any issue of fact raised in an application to the court by any interested party.
(2) Notice of the time and place of the hearing before a referee appointed to take and state an assignee’s account or to hear and report on a referred issue of fact shall be given by mail, with the postage thereon prepaid, at least 20 days before the date specified in said notice, to the assignor, the assignee’s surety and to each creditor whose name appears on the books of the assignor or on the schedule, or who has presented his or her claim or address to the assignee, and to each attorney who has appeared for any person interested in the assigned estate.
(3) A notice or a copy of an advertisement, requiring the creditors to present their claims, with the vouchers therefor duly verified to the referee, must be mailed to each creditor whose name appears on the books of the assignor or on the schedule, with the postage thereon prepaid, at least 10 days before the date specified in such notice or advertisement. Proof of such mailing shall be required on the application for a final decree approving the account of the assignee unless proof is furnished that personal service of such notice or a copy of such advertisement has been made upon the creditor.
(4) The report of the referee shall show all the jurisdictional facts necessary to confer power on the court, such as the proper execution and acknowledgment of the assignment, its recording, the filing of the schedule and bond, the publication and mailing of notice to creditors to present claims, the filing of the assignee’s account, the issuance and service of notice of application for settlement of the account, and, where any items in the account of the assignee are disallowed, the same shall be fully set out in the report, together with the reason therefor.
(5) The report of the referee after a hearing of a disputed claim under the statute shall be filed with the clerk of the court and a copy served on each party to the proceeding. The court shall, on application of any party, or on its own motion, confirm or disaffirm the referee’s report; such report shall then be reviewed only by appeal to the Appellate Division.
(f) Discharge of Assignee.
(1) No discharge shall be granted an assignee who has not advertised for claims pursuant to section 5 of the Debtor and Creditor Law and the applicable provisions of this section.
(2) No discharge shall be granted an assignee and his or her sureties in any case, whether or not the creditors have been paid, or have released, or have entered into composition, except in a regular proceeding for an accounting under the applicable provisions of the Debtor and Creditor Law, commenced by petition, and after due and timely notice thereof to all persons interested in the estate.
(3) Provisional and Final Bond. The affidavit upon which application is made for leave to file a provisional bond must show fully and fairly the nature and extent of the property assigned, and good and sufficient reason must be shown why the schedule and inventory cannot be filed. It must appear satisfactorily to the court that a necessity exists for filing of such provisional bond; and the affidavits filed shall be deemed a schedule and inventory of the assigned property until such time as the regular schedule and inventory of the assigned property shall be filed. Upon the filing of the schedule and inventory, the amount of the bond shall be determined finally. Should the provisional bond already filed be deemed sufficient, an order may be granted making such bond, as approved, the final bond.
(4) Upon all applications made to the court by assignees under general assignments for the benefit of creditors for the filing of a provisional bond, or for permission to sell the property of the assignor, the applicant shall present proof by affidavit whether any petition in bankruptcy has been filed by or against the assignor.
(5) The final bond shall be joint and several in form and must be accompanied by the affidavit prescribed by CPLR 2502, and also by the affidavit of each surety, setting forth his business, where it is carried on, and the amount in which he or she is required to justify over and above his debts and liabilities.
(g) Justification of Sureties. The court may in its discretion require any surety to appear and justify. If the penalty of the bond be $20,000 or over, it may be executed by two sureties each justifying in that sum, or by more than two sureties, the amount of whose justification, united, is double the penalty of the bond.
(h) Application to Continue Business of Assignor. An application for authority to continue the business of an assignor must be made upon duly verified petition and upon notice given to, or order to show cause served upon, the assignor, the assignee’s surety and all creditors, secured, general or otherwise, of the assigned estate. If more than one application for such authority is subsequently made, the petition must set forth, by a statement of receipts, disbursements and expenses, the result of the continuance of such business for or during the period for which the same was previously authorized.
(i) Involuntary Petition in Bankruptcy of the Assigned Estate. Where an order for relief pursuant to section 503 of Title 11 of the United States Code has been entered, the assignee shall file with the clerk a certified copy of such petition in bankruptcy, together with proof by affidavit on the part of the assignee showing that he has turned over all assets of the assigned estate to the trustee or receiver in bankruptcy.
(j) Assignee’s Commissions and Attorney’s Fees. Assignee’s allowances and attorney fees are to be fixed by the court upon a motion to settle and approve the assignee’s account or upon the confirmation of the referee’s report regarding the account. No allowances, fees or commissions shall be paid out until so fixed and directed by the court.
(k) Service of Notice by Mail. When any notice is served by mail on the creditors of the insolvent debtor pursuant to the provisions of the applicable statute or this section, every envelope containing such notice shall have upon it a direction to the postmaster at the place to which it is sent, to return the same to the sender whose name and address shall appear thereon, unless called for or delivered.
Historical Note
Sec. filed Jan. 9, 1986 eff. Jan. 6, 1986.